China's factory activity slows in Oct with recovery in sight

Workers are busy on the production line of new energy vehicles (NEVs) at a factory of Chinese automaker Chery Holding Group Co., Ltd. in Wuhu City, east China's Anhui Province, Oct. 12, 2022. (Xinhua/Zhou Mu)

BEIJING, Oct. 31 (Xinhua) -- Despite China's manufacturing sector seeing a contraction of activities in October amid the impact of COVID-19, firms expect the sector to heat up in the near term.

The purchasing managers' index (PMI) for China's manufacturing sector came in at 49.2 in October, down from 50.1 in September, data from the National Bureau of Statistics showed Monday.

A reading above 50 indicates expansion, while a reading below reflects contraction.

Sporadic and scattered COVID-19 outbreaks weighed on the October reading, the bureau's senior statistician Zhao Qinghe said.

Another cause for the decline is a contraction in energy-intensive industries, with the sub-reading coming in at 48.8, down from 50.6 in September, Zhao added.

Of the 21 industries surveyed, 11 reported PMIs in the expansion zone, indicating a generally sound business climate for manufacturers.

The PMI for large enterprises remained in the expansion zone at 50.1 in October, down from 51.1 the previous month. The sub-reading for production and new orders stood at 49.6 and 48.1, respectively.

The raw material price index rose faster than the factory-gate prices from September, which indicates companies continue to face pressure from production costs, said Zhou Maohua, an analyst with the China Everbright Bank.

New orders are on the rise with the sub-reading at 47.6, up from 47 in the previous month. This shows that domestic factories are operating effectively enough to meet the rising international demand during the ensuing high consumption season, Zhou said.

Firms anticipate manufacturing activities to pick up in the near term, with the sub-index for production and business expectations at 52.6. The readings for industries like agricultural and sideline food processing as well as electrical and mechanical equipment manufacturing topped 58.

Analysts believe that favorable policy measures rolled out for infrastructure projects, manufacturing and consumption will contribute to the consolidation of economic growth.

China has reiterated its pledge on spurring investment and consumption to address the problem of insufficient effective demand. A State Council executive meeting last week detailed efforts to be devoted to key projects and urged swift refund of newly added value-added tax credits in manufacturing.

Monday's data also showed the PMI for China's non-manufacturing sector came in at 48.7 in October, down from 50.6 in September.

The construction sector maintained expansion this month, with the sub-index for business activities standing at 58.2. The business expectation sub-index for the sector reached a recent high of 64.2, indicating increased optimism among construction enterprises.

The business expectation sub-indexes for industries like postal services, computer software and information technology services topped 60 as "Double 11," China's annual online shopping spree that falls on Nov. 11 each year, approaches.